The NZ Super Fund remains committed to its proposal to build & operate Auckland’s light rail network with a Canadian partner, but the business case remains up in the air

The NZ Superannuation Fund says it remains committed to its proposal to build and operate Auckland’s proposed light rail network with Canadian partner CDPQ Infra.

But the business case for the project is yet to be finalised, with the New Zealand Transport Agency (NZTA) leading the work on it since May last year.

“We are not aware that a preferred procurement model has been agreed upon, nor have we received any updates on the business case work being undertaken by NZTA,” NZ Super Fund spokeswoman Catherine Etheredge says.

The business proposal was supposed to be finalised at the end of last year, but as of yet it hasn’t been made public. According to a spokesperson for the NZTA, which is leading the project, the business case is still a work in progress.

“The NZ Transport Agency with its partners Auckland Council, Auckland Transport and HLC [formerly known as Hobsonville Land Company], is working hard to meet the Government’s commitment to delivering light rail for Auckland as the centrepiece of an integrated public transport system. Since May we have been developing a business case to identify a preferred route and indicative stop locations for the city centre to Mangere light rail line. That work is nearing completion and will continue to be refined.”

Transport Minister Phil Twyford has estimated the Auckland project will cost about $6 billion, making it the biggest transport project in New Zealand history.

The project will see two light rail lines established in Auckland. One leading from downtown Auckland out to the airport at Mangere, while a second line will run from the central city along State Highway 16 to Kumeu/Huapai.

The NZTA announced last week it had appointed Carl Devlin to lead the Auckland light rail development. NZTA chairman Michael Stiassny said Devlin would bring extensive expertise to the project due to his work on other major infrastructure projects around the world.

He has previously held senior leadership roles with Horizon Nuclear Power, Laing O’Rourke, Transport for London, BAA and Bechtel Infrastructure.

In May last year the Government announced more details on its plans for the public transport project.

“The Government is committed to progressing light rail to transform Auckland. It will be a magnet for private investment in urban renewal and will be able to carry 11,000 commuters per hour – the equivalent of four lanes of motorway,” Phil Twyford said.

“The New Zealand Transport Agency will now set up a robust process to explore a range of possible procurement, financing and project delivery options. This process will invite and assess all potential proposals and report back to the Ministers of Finance and Transport. The NZTA will work with the Treasury and the Ministry of Transport in this process,” Grant Robertson said.

The 10-year transport plan for Auckland included $1.8 billion in seed funding, with the option of securing private investment for the network.

A public-public investment (PPI) model

Last May the NZ Super Fund approached the Government with an offer to design, build and operate Auckland’s light rail network with Canada's CDPQ Infra, which is currently developing and building the Montreal light rail network. CDPQ was established in 1965 and manages US$238 billion in funds from a number of Canadian based pension and insurance schemes.

In October NZ Super Fund CEO Matt Whineray told www.interest.co.nz that the NZTA was deciding on what type of procurement model it wanted to use. He said the NZ Super Fund had proposed what it called a public-public investment (PPI) model, as opposed to a public-private partnership (PPP).

"That's where we would partner with whichever the government body is, it could be NZTA, it could be another ministry, and really develop the project. We would provide the equity - us plus CDPQ, we'd bring in technology and new ways of doing the construction to assist it, and we would own it over the really long-term. So it's a different model from the traditional PPP. NZTA at the moment, rolling through to Christmas, is trying to decide which of these procurement roads it goes down. We're participating in that process, we'll see what the outcome is," Whineray said.

He said if the NZ Super Fund and CDPQ were ultimately successful they would look to be long-term owners of the asset.

"That [the Montreal light rail network], is a 100 year asset. They [CDPQ] expect to own it through that. We think in that same way," Whineray says.

NZ Super Fund spokeswoman Catherine Etheredge says the PPI model, while new to New Zealand, has been successfully applied overseas to large infrastructure projects.

“The benefit of the NZ Super Fund’s involvement is that, as a New Zealand Government fund, any returns it earns will ultimately help fund New Zealand superannuation.  As our proposed investment partner, CDPQ Infra brings aligned capital funding combined with specific expertise that can also share in the project's risks and returns – their involvement means the NZ Government can share these risks with an experienced third party,” she says.

“CDPQ Infra is a leading institutional investor with considerable global experience in infrastructure investment and development; it is responsible for developing, building and operating a 67km light rail network in Montreal, and involved in developing, building and now operating 20km of Vancouver's light rail.”

Etheredge says infrastructure is a popular investment because of its attractive, consistent returns and yield.

“Long-term investors like the Fund are looking for growth assets and the potential for high risk-adjusted returns. We're also looking for investments that are large enough to make a difference to the performance of the Fund. That's why we're attracted to the development risk, size and scale that this project offers,” she says.

“The Fund’s investment in the project will be on a commercial, prudent basis, as required by our legislation, and full due diligence on the opportunity would be undertaken to ensure it meets our investment hurdles.”

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27 Comments

Hope Aucklands ratepayers are ready for the ongoing subsidies If you believe the NZ Super Fund won’t ultimately seek to divest then you do not understand business
Why would a investment that cannot possibly turn a profit & require continual finance to keep it running be a good retirement fund investment ?
They will sell it to Auckland & ratepayers will be rewarded with another debt burden
Where’s the calculation of true cost per passenger kilometre travelled after all construction , loans & ongoing running costs are included ?
Of course that would prove the whole exercise completely uneconomic & an ongoing strain on the already strained Auckland City debt mountain
Best save the expense & use funds for a replacement Auckland Harbour Bridge
How’s repairs going on the old girl It’s exceeded its design life & traffic numbers which is why trucks have to keep off the north bound clip on The welds just can’t take the excessive strains of laden trucks delivering goods from the wharf northbound.

Be careful what you wish for Auckland the costs never end -https://www.bostonglobe.com/metro/2015/08/31/mbta-panel-needed-fix-buses...

I'm a little confused as to how replacing the existing Harbour Bridge is going to address traffic issues in South and North Western Auckland.

Confused I can see you must be
I’m merely pointing out another badly needed Auckland infrastructure investment
One that actually carries vast numbers of trucks & cars and is of great proven economic benefit
Technology is advancing be aware that there’s a fleet of Level 4 self driving cars in Phoenix Arizona right now
(Human driver only there for insurance at present time but unnecessary to drive ) https://arstechnica.com/cars/2017/04/waymo-trials-free-self-driving-taxi...
Also latest from Boeing
https://www.electrive.com/2019/01/24/test-flight-boeings-vtol-flying-taxi/

Sad if Auckland finally got into mass transit on the cusp of superior transportation answers

There's still a significant path to get there: http://www.bbc.com/future/story/20181204-why-we-should-worry-when-machin...

In addition, self-driving cars will reduce traffic congestion (in part through having generally fewer stupid driving behaviours) thus investing in more and more roads is likely to be less necessary. Beyond the lower congestion through better driving, ownership models will also likely change - many in the automotive industry in NZ are anticipating some pretty radical changes, e.g. cars when you need them, and a reduced overall vehicle fleet.

"In addition, self-driving cars will reduce traffic congestion (in part through having generally fewer stupid driving behaviours) thus investing in more and more roads is likely to be less necessary."

Or they will massively increase the number of cars on the road due to the reduction in operating costs of delivery/pickup services. Drycleaning pickup/delivery, grocery delivery etc but without having to pay a driver for their time, so now costs are not sensitive to the amount of congestion.

We don't know which way it will go.

Running costs are low. Not sure about the new airport route, but when it was just going to Mt Roskill the operational costs were meant to be lower than the current cost of running the Dominion Road buses.
In terms of cost of construction etc, it doesn't really matter as there is no alternative (other than the common interest.co.nz solution of zero growth).
A new harbour bridge will do nothing for people who live in Mt Eden, Mt Roskill, Hillsborough, Onehunga, Mangere Bridge, Mangere or for people who work or need to go to the airport.

“Running costs are low” ?
With due respect undeserved the running cost is not the total cost at all

Poor ratepayers
I’ll bet you the Super Fund will divest as soon as it can

going to the airport from MT roskill is just plain stupid,
they need to visit MOTAT and see the map of old network, guess what it is still revelant for today and makes more sense running the trams down the main roads all from the city centre
the airport should be serviced by rail running from onehunga looping to manukau

Mt roskill route is actually shorter than the route you suggest. Servicing the airport with heavy rail from onehunga might be better if it wasn’t for the massive cost. Light rail to airport ain’t perfect but a pretty good compromise compared to other options that just don’t stack up in a business case.

Light rail is used successfully worldwide as mass transit in densely populated areas.

We will use light rail to parallel motorways.

Maybe we have found a completely new use for an existing technology, or maybe we are idiots.

“light rail is used successfully worldwide”
Successfully runs on massive subsidies
You seem to be unaware
Come to Boston & I’ll show you our property taxation & mass transit subsidies
However I neglected the fact you are paying $2:30 per litre for regular gas ! Maybe the idea is to drive you into poverty so the only way to move will be by train ?

Everything runs on massive subsidies - buses, roads, trains, trams, airports, cycle-lanes.

Do public hospitals make a profit in New Zealand?

They will when they start selling body parts!

Elon Musk tweeted that they could do high speed 2 way tunnelling for about USD$15million per km plus $50 million per station. Expected to ultimately match about 4 lanes of motorway for throughput.
https://twitter.com/greensjeremy/status/1085345848458805248
Can we please plow the $6 Billion white elephant/tram money into say 40 stations and 200km of such tunnels under Auckland instead?

Maybe you could drive a Tesla through that tunnel - assuming either ever get built.

additional value uplift tax is coming - https://www.interest.co.nz/property/90689/auckland-mayor-goff-keen-value...

And fair enough too.

Cool, can I get a rebate for the extra time this plan is being dragged out then? I'm paying the fuel tax now and the business case, like most Auckland problems, have disappeared into a hole in Wellington.

Just because Phil Goff wants it does not mean it will happen ; you and he will be disappointed.

My god NZ urban planning is retarded. Build up the density *inside* Auckland, then these public transport schemes will be cost effective. It's not bloody rocket science.

Bit hard when the Grey Lynn set suddenly become opposed to intensification when it means it happens in their street.

Why should a few NIMBYs hold up a whole city?

And anyone care to estimate the probability of an Airport remaining open beyond - oh - 2040-2060? Stranded asset much?

Even more reason for light rail then - the airport is just one of 20 stations on the route.

Sure. 100%. Next?

Edit: Unless teleportation becomes a real thing.

Critical Auckland project delayed by Wellington transport bureaucracy. Who would have thought.

The Super Fund want favourable tax rates (over 50% less than what the rest of us pay) , no CGT (when everyone is likely to be hit with one on their investment if Labour has their way), dividend tax adjustments of no taxation (not available to any other investor), RMA non compliance (not available to other investors), bring in foreign skilled labour (instead of training locals to get of the couch). That is a bucket load of concessions.

https://www.interest.co.nz/business/96251/nz-super-fund-eyeing-aucklands...

“In a submission to the Tax Working Group, the Super Fund says such a regime should offer a tax rate of half or less the current 28% corporate tax rate for a meaningful part of the life of the asset. Additionally there should be no further tax impost on profit distribution to either domestic or foreign investors, and full deductibility of third party non-recourse funding should be included.

Should a capital gains tax be introduced, the Super Fund says nationally significant infrastructure should be eligible for an exemption on exit. Additionally the Super Fund wants the ability to fast track required regulatory approvals such as Resource Management Act approvals, and for foreign skilled labour to be allowed to be used to help with rapid construction.”